Summary of AMGEN INC - Yahoo! Finance

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward looking statements

This report and other documents we file with the SEC contain forward looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business or others on our behalf, our beliefs and our management's assumptions. In addition, we, or others on our behalf, may make forward looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls. Words such as "expect," "anticipate," "outlook," "could," "target," "project," "intend," "plan," "believe," "seek," "estimate," "should," "may," "assume," "continue," variations of such words and similar expressions are intended to identify such forward looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. We describe our respective risks, uncertainties and assumptions that could affect the outcome or results of operations in "Item 1A. Risk Factors" in Part II herein. We have based our forward looking statements on our management's beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecast by our forward looking statements. Reference is made in particular to forward looking statements regarding product sales, regulatory activities, clinical trial results, reimbursement, expenses, EPS, liquidity and capital resources and trends. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

Overview

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to assist the reader in understanding the business of Amgen. MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and our consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2008.

We are a global biotechnology company that discovers, develops, manufactures and markets human therapeutics based on advances in cellular and molecular biology. Our mission is to serve patients. As a science-based, patient-focused organization, we discover and develop innovative therapies to treat grievous illness. We operate in one business segment - human therapeutics. Therefore, our results of operations are discussed on a consolidated basis.

We primarily earn revenues and income and generate cash from sales of human therapeutic products in the areas of supportive cancer care, nephrology and inflammation. Our principal products include Aranesp®, EPOGEN®, Neulasta®, NEUPOGEN® and ENBREL, all of which are sold in the United States. ENBREL is marketed under a co-promotion agreement with Pfizer in the United States and Canada. Our international product sales consist principally of European sales of Aranesp®, Neulasta® and NEUPOGEN®. International product sales represented 22% of total product sales for both the three and nine months ended September 30, 2009. International product sales represented 23% and 22% of total product sales for the three and nine months ended September 30, 2008, respectively.

Aranesp® and EPOGEN® stimulate the production of red blood cells to treat anemia and belong to a class of drugs referred to as ESAs. Aranesp® is used for the treatment of anemia both in supportive cancer care and in nephrology. EPOGEN® is used to treat anemia associated with chronic renal failure ("CRF"). Neulasta® and NEUPOGEN® selectively stimulate the production of neutrophils, one type of white blood cell that helps the body fight infections. ENBREL blocks the biologic activity of tumor necrosis factor ("TNF") by inhibiting its binding to TNF receptors, a substance induced in response to inflammatory and immunological responses, such as rheumatoid arthritis and psoriasis. For both the three and nine months ended September 30, 2009, our principal products represented 93% of worldwide product sales. For both the three and nine months ended September 30, 2008, our principal products represented 94% of worldwide product sales. For additional information about our principal products, their approved indications and where they are marketed, see "Item 1. Business - Marketed Products and Selected Product Candidates" in Part I of our Annual Report on Form 10-K for the year ended December 31, 2008.

We operate in a highly regulated industry and various U.S. and foreign regulatory bodies have substantial authority over how we conduct our business. Government authorities in the United States and in other countries regulate the manufacturing and marketing of our products and our ongoing R&D activities. The regulatory environment is evolving and there is increased scrutiny on drug safety and increased authority being granted to regulatory bodies, in particular the U.S. Food and Drug Administration ("FDA"), to assist in ensuring the safety of therapeutic products, which may lead to fewer products being approved by the FDA or other regulatory bodies,

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delays in receiving approvals or additional safety-related requirements or restrictions on the use of our products, including expanded safety labeling, required risk management activities, including a risk evaluation and mitigation strategy ("REMS"), and/or additional or more extensive clinical trials as part of postmarketing commitments ("PMCs") or a pharmacovigilance program. For example as discussed in more detail below, in October 2009, the FDA issued complete response letters for our biologic license applications ("BLAs") for Prolia™ (denosumab) in the treatment and prevention of postmenopausal osteoporosis ("PMO") and in the treatment and prevention of bone loss due to Hormone Ablation Therapy ("HALT") in breast and prostate cancer patients requesting additional information in connection with their review of our applications for product approval, which has extended the review time for our BLAs beyond their October 19, 2009 Prescription Drug User Fee Act ("PDUFA") date. In addition, the FDA has determined that a REMS is necessary for Prolia™ and has requested a new clinical program to support approval of Prolia™ for the prevention of PMO. (The FDA has provisionally approved the trade name Prolia™ in the indications noted above, for which the drug is administered twice yearly subcutaneously at a 60 milligram ("mg") dose. The trade name is only for these indications and may not apply for other indications of denosumab.)

Most patients receiving our principal products for approved indications are covered by either government or private payer healthcare programs, which are placing greater emphasis on cost containment, including requiring that the economic value of products be clearly demonstrated. Governments may regulate access to, prices or reimbursement levels of our products to control costs or to affect levels of use of our products and private insurers may be influenced by government reimbursement methodologies. Worldwide use of our products may be affected by these cost containment pressures and cost shifting from governments and private insurers to healthcare providers or patients in response to ongoing initiatives to reduce or reallocate healthcare expenditures. Therefore, sales of our principal products have and will continue to be affected by the availability and extent of reimbursement from third-party payers, including government and private insurance plans, and administration of those programs. Additionally, ongoing healthcare reform efforts may also have a significant impact on our business. For example, the 2008 U.S. general elections resulted in a renewed focus on healthcare issues in the United States. Healthcare reform is a top priority for President Obama and Congress is now considering several different bills which would make wide-ranging changes to the United States healthcare system in order to expand and to fund coverage to millions of uninsured Americans, to substantially reduce the rate of increase in the costs of government-sponsored healthcare programs and to improve the quality and portability of healthcare. Bills on healthcare reform have been passed by key Congressional committees and are expected to be considered by the full Congress before the end of 2009. Further, a number of states, including California, Colorado, Connecticut, New York and Pennsylvania, are considering or have recently enacted legislative proposals that would significantly alter their healthcare systems. If healthcare reform legislation in the United States is passed, it may include reducing the coverage and reimbursement of our products by Medicare, Medicaid and other government programs and additional healthcare reform costs being borne by pharmaceutical and biotechnology companies, including us, each of which could have a significant impact on our business.

Further, safety signals, trends, adverse events or results from clinical trials, including sub-analyses, studies or meta-analyses (a meta-analysis is the review of studies using various statistical methods to combine results from previous separate, but related, studies) performed by us or by others (including our licensees or independent investigators) or from the marketed use of our products may expand safety labeling, restrict the use of our approved products or may result in additional regulatory requirements, such as requiring risk management activities, including a REMS, and/or additional or more extensive clinical trials as part of PMCs or a pharmacovigilance program, and may negatively impact sales or coverage or reimbursement of our products. For example, as discussed in more detail below, we announced on October 30, 2009, the publication of results from TREAT (the Trial to Reduce Cardiovascular Endpoints with Aranesp® Therapy), a large, randomized, double-blind, placebo-controlled, phase 3 pivotal study of patients with chronic kidney disease ("CKD") not on dialysis, moderate anemia and type-2 diabetes. The study failed to meet its primary objectives of demonstrating a reduction in all-cause mortality, cardiovascular morbidity, including heart failure, heart attack, stroke, or hospitalization for myocardial ischemia, or time to end-stage renal disease ("ESRD"). We have shared this information with global regulatory authorities and anticipate that the TREAT results will be included in the labeling of our ESAs once analyses and discussions are complete.

Certain regulatory and reimbursement developments have and may continue to negatively impact sales of certain of our products or require us to incur additional expenditures to obtain approval to market our products or to maintain approval once obtained, in particular in the United States where the impact of these developments on our business has thus far been more pronounced. As a result, we continue to focus on improving our cost structure and achieving greater efficiencies in how we conduct our business while continuing to support critical R&D and operational priorities, including preparing for the launch of Prolia™.

Worldwide product sales for the three and nine months ended September 30, 2009 were $3,736 million and $10,608 million, respectively, representing decreases of 1% and 4%, respectively, compared to the corresponding periods in the prior year. U.S. product sales for the three months ended September 30, 2009 totaled $2,918 million, relatively unchanged compared to the prior year as the decline in U.S. Aranesp® sales of $125 million was largely offset by increased U.S. sales of our other principal products. U.S. product sales for the nine months ended September 30, 2009 were $8,253 million compared to $8,560 million for the nine months ended September 30, 2008, representing a decrease of 4%. For the nine months ended September 30, 2009, the decline in U.S. product sales was largely attributable to declines in Aranesp® sales of $327 million and ENBREL sales of $101 million, partially

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offset by increased sales of our other principal products. The decline in U.S. Aranesp® sales for the three and nine months ended September 30, 2009 principally reflects the negative impact, primarily in the supportive cancer care setting, of additional safety-related product label changes that occurred in August 2008. In addition, U.S. Aranesp® sales in the three and nine months ended September 30, 2008, benefited from a $54 million change in the accounting estimate related to product sales return reserves recorded in the three months ended September 30, 2008. The decline in ENBREL sales for the nine months ended September 30, 2009 primarily reflects a $120 million benefit to ENBREL's sales in 2008 related to the initial wholesaler inventory stocking resulting from a change in ENBREL's distribution model. During the three months ended March 31, 2008, ENBREL's distribution model was converted from being primarily drop shipped to pharmacies to a wholesaler distribution model similar to our other products, which resulted in this initial wholesaler stocking. International product sales were $818 million for the three months ended September 30, 2009 compared to $855 million for the three months ended September 30, 2008, representing a decrease of 4%. International product sales were $2,355 million for the nine months ended September 30, 2009 compared to $2,453 million for the nine months ended September 30, 2008, representing a decrease of 4%. The decrease in international product sales for the three and nine months ended September 30, 2009 reflects unfavorable foreign currency exchange rate changes of $76 million and $248 million, respectively. Excluding the impact of foreign currency exchange rate changes, worldwide product sales increased 1% for the three months ended September 30, 2009 and declined 1% for the nine months ended September 30, 2009. Excluding the impact of foreign currency exchange rate changes, international product sales for the three and nine months ended September 30, 2009 increased 5% and 6%, respectively.

For the three months ended September 30, 2009, net income was $1,386 million and diluted earnings per share were $1.36 compared to $1,121 million and $1.05, respectively, for the three months ended September 30, 2008, representing increases of 24% and 30%, respectively. For the nine months ended September 30, 2009, net income was $3,674 million and diluted earnings per share were $3.58 compared to $3,127 million and $2.90, respectively, for the nine months ended September 30, 2008, representing increases of 17% and 23%, respectively. Net income and diluted earnings per share for the three and nine months ended September 30, 2009 were favorably impacted by lower Cost of sales and R&D expenses and a lower effective tax rate. In addition, for the nine months ended September 30, 2008, operating expenses were negatively impacted by $267 million in loss accruals for settlements of certain commercial legal proceedings.

As of September 30, 2009, cash, cash equivalents and marketable securities aggregated $14.0 billion, of which approximately $11.1 billion was generated from operations in foreign tax jurisdictions and is intended for use in our foreign operations. If these funds were repatriated for use in our U.S. operations, we would be required to pay additional U.S. federal and state income taxes at the applicable marginal tax rates (see "Item 1A. Risk Factors - Significant changes to U.S. federal, state and foreign tax laws and regulations that apply to our operations and activities could have a material adverse effect on our financial results." in Part II herein). Our total debt outstanding was $11.5 billion as of September 30, 2009 of which $1.0 billion is due on November 18, 2009, which we expect to repay without incurring additional indebtedness.

The following is a discussion of selected key factors that have impacted and may continue to impact our business.

Denosumab Developments

Prolia™ for the Prevention and Treatment of PMO and the Prevention and Treatment of Bone Loss in Patients Undergoing HALT for either Prostate Cancer or Breast Cancer

On August 13, 2009, we announced the results of our meeting with the FDA's Advisory Committee for Reproductive Health Drugs ("ACRHD") to review the potential use of Prolia™ for the prevention and treatment of PMO and the prevention and treatment of bone loss in patients undergoing HALT for either prostate cancer or breast cancer. The Committee recommended approval of Prolia™ for the treatment of PMO and for the treatment of bone loss in patients undergoing HALT for prostate cancer. The Committee recommended against approval of Prolia™ to treat or prevent bone loss in women with breast cancer undergoing HALT until additional data are available. The Committee also recommended against approval of Prolia™ to prevent bone loss in low-risk patients in all three populations. Finally, the panel recommended that Prolia™ have a REMS, which could include a medication guide and a healthcare provider communications plan. The ACRHD is an advisory committee of external experts who advise the FDA about the safety and effectiveness of marketed and investigational human drugs for use in the practice of obstetrics, gynecology and related specialties. This committee is advisory only and FDA officials are not bound to or limited by their recommendations. However, the FDA commonly follows the recommendations of its advisory panels.

In October 2009, the FDA issued complete response letters for our BLAs for Prolia™ in the treatment and prevention of PMO and in the treatment and prevention of bone loss due to HALT in breast and prostate cancer patients. The FDA issues complete response letters to request additional information needed to complete the review of applications for product approval.

The complete response letter related to the Prolia™ applications for the treatment and prevention of PMO requested several items, including further information on the design and background adverse event rates that will inform the methodology of our

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previously submitted post-marketing surveillance program although the letter did not require additional pre-marketing clinical trials to complete the review of the treatment indication. The FDA has also requested a new clinical program to support approval of Prolia™ for the prevention of PMO. In addition, the FDA has determined that a REMS is necessary for Prolia™ and must include a medication guide, a communication plan and a timetable for submission of assessments of the REMS. The FDA acknowledged receipt of our previously submitted proposed REMS materials. The FDA has also requested all updated safety data related to Prolia™.

The complete response letter on the Prolia™ HALT applications requested additional information regarding the safety of Prolia™ in patients with breast cancer receiving aromatase inhibitor therapy and patients with prostate cancer receiving androgen deprivation therapy ("ADT"). Specifically, the FDA has requested results from additional adequate and well-controlled clinical trials demonstrating that Prolia™ has no detrimental effects on either time-to-disease progression or overall survival.

Amgen is reviewing both complete response letters and will work with the FDA to determine the appropriate next steps regarding these applications.

We also have submitted Prolia™ for approval in PMO and bone loss in breast and prostate cancer patients due to HALT in the European Union ("EU"), Switzerland, Australia and Canada. We are working closely with regulatory agencies in each of these regions.

Denosumab Phase 3 Clinical Trials for the Prevention of Skeletal Related Events ("SRE") Due to the Spread of Cancer to the Bone

Multiple Solid Tumors and Multiple Myeloma

On September 21, 2009, we announced detailed results from a phase 3 trial evaluating denosumab administered subcutaneously versus Zometa® (zoledronic acid) administered as an intravenous infusion in the treatment of bone metastases in 1,776 advanced cancer patients with solid tumors (not including breast and prostate cancer) or multiple myeloma. These detailed results were presented at the 2009 Congresses of the European CanCer Organization ("ECCO") and European Society for Medical Oncology ("ESMO") in Berlin, Germany. Top line results of this study were previously reported on August 3, 2009.

This was an international, phase 3, randomized, double-blind, active-comparator-controlled study comparing denosumab with Zometa® in the treatment of bone metastases in patients with advanced cancer (excluding breast and prostate cancer) or multiple myeloma. Patients enrolled in this event-driven study were randomized in a one-to-one ratio to receive either 120 mg of denosumab subcutaneously every four weeks or Zometa® administered intravenously at a dose of 4 mg delivered as a single, 15-minute infusion every four weeks.

In clinical trials thus far to test new medications for bone metastases, treatment success has been measured by whether the bone complications, or SREs, caused by the tumor are reduced or delayed. The primary and secondary endpoints of the denosumab bone metastases studies use a composite endpoint of four SREs-fracture, the need for radiation to bone, the need for bone surgery and spinal cord compression-to measure the effectiveness of denosumab versus Zometa®.

The primary endpoint was to evaluate if denosumab is non-inferior to Zometa® with respect to the time to first on-study SRE in patients with advanced cancer (excluding breast and prostate cancer) or multiple myeloma and bone metastases. Secondary endpoints were to evaluate if denosumab is superior to Zometa® with respect to the time to first on-study SRE, as well as time to first-and-subsequent on-study SREs, and to assess the safety and tolerability of denosumab compared with Zometa®.

For the primary endpoint of this study, the median time to first on-study SRE (fracture, radiation to bone, surgery to bone or spinal cord compression) was 20.6 months for those patients receiving denosumab and 16.3 months for those patients receiving Zometa® (hazard ratio ("HR") 0.84, [95% Confidence Interval ("CI"): 0.71-0.98]), which is statistically significant for non-inferiority (p=0.0007). Although numerically greater, the delay in the time to first SRE associated with denosumab was not statistically superior compared to Zometa® based upon the statistical testing strategy (adjusted p=0.06) (secondary endpoint). The time to first-and-subsequent SRE was also numerically greater but not statistically superior compared to Zometa® (HR 0.90, [95% CI: 0.77-1.04], p=0.14) (secondary endpoint). Denosumab also delayed the median time to first on-study SRE or hypercalcemia of malignancy ("HCM") compared to Zometa® (HR 0.83, [95% CI: 0.71-0.97], p=0.02). The median time to first on-study SRE or HCM was 19.0 months for denosumab and 14.4 months for Zometa®.

In an exploratory analysis, patients on the denosumab arm reported worsening of pain later than those on the Zometa® arm (57 days versus 36 days, respectively). Adverse events rates (96% denosumab, 96% Zometa®) and serious adverse events (63% denosumab, 66% Zometa®) were similar between groups and were consistent with what has previously been reported for these two agents. Rates of osteonecrosis of the jaw ("ONJ") were balanced and infrequent in both treatment groups (10 patients receiving

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denosumab as compared with 11 patients receiving Zometa®). Infectious adverse events were balanced between the two treatment arms, as was overall survival (HR 0.95, [95% CI: 0.83-1.08], p=0.43) and the time to cancer progression (HR 1.00,
[95% CI: 0.89-1.12], p=1.0). In certain populations, such as non-small cell lung cancer ("NSCLC"), which represented 39% of the treated population, there was a difference in overall survival that favored denosumab, which was nominally statistically significant. For multiple myeloma, there was a difference in overall survival that favored Zometa®, which was nominally statistically significant.

Breast Cancer

On September 22, 2009, we announced detailed results from a phase 3, head-to-head trial evaluating denosumab versus Zometa® (zoledronic acid) in the treatment of bone metastases in 2,046 patients with advanced breast cancer that met its primary and secondary endpoints and demonstrated superior efficacy compared to Zometa®. These detailed results were presented at the 2009 Congresses of the ECCO and ESMO in Berlin, Germany. Top line results of this study were previously reported on July 7, 2009.

This was an international, phase 3, randomized, double-blind study comparing denosumab with Zometa® in the treatment of bone metastases in patients with advanced breast cancer. Patients enrolled in the study were randomized in a one-to-one ratio to receive either 120 mg of denosumab subcutaneously every four weeks or Zometa® administered intravenously at a dose of 4 mg in a 15-minute infusion every four weeks as per the label instructions.

In clinical trials testing new medications for bone metastases, treatment success has been measured by whether the bone complications, or SREs, caused by the tumor are reduced or delayed. The primary and secondary endpoints of the denosumab bone metastases studies use a composite endpoint of four SREs-fracture, the need for radiation to bone, the need for bone surgery and spinal cord compression-to measure the effectiveness of denosumab versus Zometa®.

The primary endpoint was to evaluate if denosumab is non-inferior to Zometa® with respect to the first, on-study SRE in patients with advanced breast cancer and bone metastases. Secondary endpoints were to evaluate if denosumab was superior to Zometa® with respect to the first, on-study SRE, as well as the first-and-subsequent on-study SREs, and to assess the safety and tolerability of denosumab compared with Zometa®.

Denosumab administered subcutaneously demonstrated superiority for both delaying the time to the first on-study SRE (fracture, radiation to bone, surgery to bone or spinal cord compression) (HR 0.82, [95% CI: 0.71-0.95]), and delaying the time to first-and-subsequent SREs (HR 0.77, [95% CI: 0.66-0.89]). Both results were statistically significant in this 34 month study. The median time to first on-study SRE was not reached for denosumab and therefore could not be estimated. The median time to first on-study SRE was 26.5 months for Zometa®, the current standard of care.

Denosumab also delayed the median time to first on-study SRE or HCM compared to Zometa® (HR 0.82, [95% CI: 0.70-0.95], p=0.007). The median time to first on-study SRE or HCM was not reached for denosumab and therefore could not be estimated. The median time to first on-study SRE or HCM was 25.2 months for Zometa®.

In a pre-specified exploratory analysis, patients on the denosumab arm reported worsening of pain later than those on the Zometa® arm (88 days versus 64 days, respectively; HR 0.87, [95% CI: 0.79-0.97], p=0.009). Overall, the incidence of adverse events (96% denosumab, 97% Zometa®) and serious adverse events (44% denosumab, 46% Zometa®) was consistent with what has previously been reported . . .